I'm sure someone who properly understands the technicals of this will chime in, but until then here is my understanding of it.

The sRAW and mRAW files from the Mark III (and Mark II before it) are just different enough from the full sized raw files that Adobe's DNG converter doesn't fully understand them (Adobe software doesn't have a problem opening and editing them though). When it converts them to DNG it thinks it's working with full sized raw files and sizes them accordingly which balloons up the file size.

As far as I know, there is no work around for this. If you shoot sRAW or mRAW or any of the down sized RAW formats, you're much better off leaving them as .cr2 files rather than converting them to DNG.